With so much volatility from the boom, there are several alternatives for investors looking to avoid or reduce their exposure to artificial intelligence trading. Investors and analysts are increasingly looking to other parts of the market to find neglected sources of value or to protect against a possible economic downturn. Dan Alpert, managing partner at Westwood Capital, told CNBC: “I personally actively include buying protection in my trading portfolio, and the prices are cheap.” “It’s very cheap. It’s ridiculously cheap. Almost too cheap because the consensus is leaning in one direction.” AI trading has also experienced stagnation over the past month across data centers and infrastructure, semiconductors, and memory components. The Global X Data Center Digital Infrastructure ETF (DTCR) is down more than 10% month-over-month. The PHLX Semiconductor Index (SOX) is down about 12%, and the Round Hill Memory ETF (DRAM) is down nearly 20%. In response, UBS this week compiled a list of 40 stocks rated buys that it believes offer solid diversification away from AI. Here are 10: “A number of quality operators with defensive characteristics have fallen out of favor,” UBS’s Joseph Parkhill said in a letter to clients on Wednesday. “In many cases, high-quality defenses have underperformed, even though fundamentals remain strong, leading to significant valuation reductions.” Most of the companies UBS looks at fall into the traditional value sectors for stock markets during recessions. These include McDonald’s and the Pepsi Company, as well as financial companies such as securities firm Charles Schwab and financial information firm S&P Global. The list also includes several software names that many analysts believe have strong fundamentals, such as Thomson Reuters and SS&C Technologies. Thomson Reuters is up more than 20% over the past month, while SS&C is up nearly 3%. Defensiveness about the bursting of the AI bubble is not limited to stocks. “What else is really cheap? The two-year. If you believe that the two-year is perfectly tied to the policy rate and that the policy rate won’t go up but will probably come down, you win even if the policy rate is stable, because the protection is so cheap,” said Alpert of Westwood Capital.
